The House Ways and Means Committee released its draft legislation around tax credits for families for the budget resolution, and, like the proposals the Committee marked up last week, it makes historic investments in women and families. The legislation would make the American Rescue Plan Act’s expansions to the Earned Income Tax Credit (EITC) permanent to ensure workers with low incomes who are not claiming children for the credit are not taxed into poverty. The Ways and Means bill would also make the ARPA’s improvements to the Child and Dependent Care Tax Credit (CDCTC), which provides tax assistance with families’ out of pocket child care costs permanent, making the credit refundable for the first time.
The Ways and Means bill would also extend critically important improvements to the Child Tax Credit (CTC). In particular, the bill would make the ARPA’s full refundability of the CTC permanent, which is key to ensuring Black and Latinx children can benefit from the credit. The bill would also undo a harmful restriction wrought by the 2017 Trump tax law, which prevented nearly a million children in immigrant families from receiving the CTC. Moreover, the Ways and Means bill extends the increased, advance CTC through 2025.
Expanded refundable tax credits are helping families during an uneven recovery and particularly stressful back-to-school season, and will support families’ well-being in the long run. Research has shown that the income boosts from refundable tax credits improve children’s health, educational outcomes, and future employment. And results from a recent nationwide poll show that many families plan to use their tax refunds this year to support their families by paying bills and household expenses.
In July, before the first advance CTC payments went out, the national polling firm IPSOS conducted a national survey of 1,000 families eligible for the CTC. The survey was developed in consultation with NWLC, Children’s Defense Fund, Columbia University’s Center for the Study of Social Policy (CSSP), the Center for Law and Social Policy (CLASP), Prosperity Now, and the Urban Institute-Brookings Institution Tax Policy Center, along with researchers at the University of California, Berkeley. Among other questions, the survey asked respondents to list three ways they planned to use their tax refunds this year.
About 27% of respondents, across income levels and racial categories, stated that they planned to use their refunds to pay bills, utilities, and other household expenses. But families with lower incomes—making less than $50,000—were more likely to report that they planned to use their refunds on necessities, including clothes, groceries, car expenses, and child care, than higher-income families.
The July Census Pulse survey confirmed that women are using those payments to cover necessities like food and rent, and women of color were more likely to spend their payments on basic household expenses compared to white men and white women. For example, more than half of Asian, Latina, and Black women used some of their CTC payment to purchase food, compared to 32.1% of white men. Families also used their refunds to pay down debt, potentially stabilizing family budgets after the hardships of the past eighteen months.
These survey findings emphasize the importance of extending the expanded CTC, along with other refundable tax credits for families. If enacted, the proposals in the Ways and Means bill would make sure that women and families—especially low-income families and families of color—receive the support they need and deserve. These policies will help support an equitable recovery and build back a better economy that works for all of us.